TaxTMI 
TaxTMI 
2026 (9) TMI 1482
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....in contravention of the provisions of Section 171 of the Central Goods and Services Tax Act, 2017 (for short "the CGST Act, 2017") in so far as it failed to pass on the benefit of reduction in GST rates on cinema admission tickets from 18% to 12% w.e.f. 01.01.2019 vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 (for short "the Notification"). It is alleged that the Respondent failed to commensurately reduce the prices of such tickets thereby denying the benefit of tax reduction from 18 % to 12% to the recipients. 3. The genesis of the present dispute lies in the reduction of the GST rate on "Services by way of admission to exhibition of cinematograph films" vide said Notification. Pursuant to this notification, the GST rate on cinema tickets priced at one hundred rupees or less were reduced from 18% to 12% with effect from 01.01.2019. 4. The Respondent operates a single-screen theatre in Hyderabad selling tickets in three categories, namely Balcony for Rs. 100/-, Second Class for Rs. 60/-, and Third Class for Rs. 30/-. After the said notification, it did not reduce its selling prices commensurately instead increased the base price and continued with the same....
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.... pre-rate reduction period. In the post-rate reduction period effective from 01.01.2019, the price of admission tickets (inclusive of tax) in three categories were not reduced and cum tax price of aforesaid three categories remained same even after the rate reduction. Therefore, the benefit of rate-reduction was not passed on to the recipients. The Respondent increased the base price of tickets when the GST rates were reduced from 18% to 12%, to deny with the passing of the benefit to the recipients, in the following manner; Sr.No. Category of Admission ticket 01.12.2018 to 31.12.2018 01.01.2019 to 30.09.2019 Increase the base price (%approx.) Amount charged i.e. inclusive of tax (in Rs.) GST Rate (%) Price of Ticket i.e. Base Price (in Rs.) Amount charged i.e. inclusive of tax (in Rs.) GST Rate (%) Price of Ticket i.e. Base Price (in Rs.) Commensurate Base Price (in Rs.) Amount which was to be Charged (in Rs.) A B C D E=[C/1 18%] F G H I J=(I*112 %) K=((H/I*100)-100) 1 Balcony 100 18 84.75 100 12% 89.29 84.75 94.92 5.36 2 Second Class 60 18 50.85 60 12% ....
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....as Rs. 43,453/-. Adding this to the earlier amount, the total profiteering for the entire period from 01.01.2019 to 31.10.2019 came to Rs. 10,19,280/-(Rupees Ten Lakh Nineteen Thousand Two Hundred Eighty Only). The DGAP concluded that the Respondent had contravened the provisions of Section 171(1) of the CGST Act by failing to pass on the benefit of the GST rate reduction to the recipients through commensurate reduction in prices. 16. The DGAP tabulated the profiteering made by the Respondent for the period from 01.10.2019 to 31.10.2019, as hereunder:- 01.12.2018 to 31.12.2018 01.10.2019 to 31.10.2019 1 2 3 4 5 6 7 8 9 10 11 12 13 Sr.No. Category of Admission ticket Amount charged i.e. inclusive of tax (in Rs.) GST Rate (%) Price of Ticket i.e. Base Price (in Rs.) Amount charged i.e. inclusive of tax (in Rs.) GST Rate (%) Price of Ticket i.e. Base Price (in Rs.) Commensurate Base Price (in Rs.) Amount which was to be charged inclusive of tax (in Rs.) Profiteering per ticket Quantity Sold Total profiteering including Tax A B C D E=C/118% F G H=F/(1+ G/10....
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....maintenance chares, security charges etc. the DGAP without bifurcating the same erroneously calculated the profiteered amount. The methodology and the calculations, adopted and made by the DGAP is contrary to the provisions of law. 23. The Respondent had not contravened the Section 171 of the CGST Act, 2017. The selling price of the tickets as sold by the Respondent are within permissible limit and fixed by the State Government and the Authorities. 24. The Respondent has paid GST at the rate of 12% on the consideration for "Supply of services by way of admission to exhibition of cinematograph films" throughout the relevant period. There has been no change in the rate of tax during the time span of the scheme. In the absence of any reduction in the rate of tax, the question of passing on the benefit of such reduction does not arise. Clarification by the DGAP:- 25. The DGAP submitted its clarification against the submission made by the Respondent. it is averred that the Respondent has admitted that even after reduction of the GST rate from 18% to 12%, the ticket prices were maintained by them from 01.01.2019. 26. Heard Shri Praveen Kumar, Additional Assistant Director/....
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....CGST Act, 2017. The evidence on record, as analysed by the DGAP, unequivocally demonstrates that the Respondent did not reduce the final cum-tax selling price of the tickets after the GST rate reduction from 18% to 12% w.e.f. 01.01.2019, but instead increased the base price to absorb the benefit of the tax reduction, thereby maintaining the same price. This resulted in a clear case of profiteering, as the benefit of the tax reduction was not passed on to the ultimate consumers. 33. Per contra, learned Counsel for the Respondent submitted that:- (i) Pursuant to the order dated 31.10.2019 passed by the Hon'ble High Court for the state of Telangana in W.P. No. 19046 of 2024, the Respondent on time-to-time basis submitted the application to the competent Authority whenever there was a hike in ticket prices but the authorities kept the representation abeyance and no action was taken. A batch of writ petitions was filed before the State of Telangana and an interim order was granted to the petitioners. (ii) The Respondent has increased the base price of the tickets under the intimation to the authority from time to time according to the orders passed by the State ....
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....ferred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. (3A) Where the Authority referred to in sub-section (2), after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered: Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. Explanation- For the purposes of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both". 37. The provisions contained in Section 171 of the CGST Act mandate that any reduction in the rate of tax, on any supply of goods and services, the benefit of ITC should be passed on to the consumer by way of a commensurate reduction in prices. ....
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....gh GO Ms No. 100, Home (General A) Department dated 26.04.2013, had fixed the rates of admission to cinema theatres. Subsequently, the State of Telangana, in a batch of Writ Petitions, set aside the said GO and permitted the theatre owners to collect their proposed fares, subject to intimating the authorities and paying taxes proportionate to the proposed rates. The Respondent further averred that it had intimated the proposed ticket rates to the authorities from time to time and was therefore justified in maintaining the same prices. 42. The averments made by the Respondent are contradictory in nature under the facts and circumstances of the case. Taking different pleas for justifying the hike in the rate of Cinema tickets, do not justify the correctness of the increment in prices. In the absence of any cogent or corroborative evidence supporting the alleged grounds for the price hike, and considering the contradictory nature of the Respondent's pleadings, the increment in the base price of cinema tickets, as effected by the Respondent, is untenable and cannot be sustained in law. 43. Further, the Respondent has failed to bring on record any relevant Government Order for....
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....wners. As far as this discretion is concerned, it has not been tampered with or in any way restricted by the local law and Special law as mentioned above, except prescribing a higher limit. Moreover Rs. 3/- additional charge of maintenance cost has to be included in the ticket as its Central law will take precedence and GST has to be calculated on this Rs. 3/- also. So, we do not find any substance in the contention raised by the Learned Counsel for the Respondent." (Emphasis Added) 46. The learned Counsel for the Respondent has vehemently argued that Cinema owners do not issue any invoices and no goods are supplied to the viewers therefore question of profiteering does not arise. 47. Under the facts and circumstances of the case in hand, it is relevant that the Respondent operates a single-screen theatre in Hyderabad selling tickets in three categories, namely Balcony for Rs. 100/-, Second Class for Rs. 60/-, and Third Class for Rs. 30/-.The services are supplied by the Respondent to its viewers. The Respondent is duly registered with the GST department. It is an admission on the part of the Respondent that it is submitting regular returns to the GST Authority. 4....
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....hereof, the respondent can always try to read one line from" (Emphasis added) 51. The Hon'ble Apex Court in Lohia Properties (P.) Ltd. v. Atmaram Kumar (1993) 4 SCC 6 observed:- "13. What is stated in the above is, what amount to admit a fact on pleading while Rule 3 of Order 8 requires that the defendant must deal specifically with each allegation of fact of which he does not admit the truth. 14. Rule 5 provides that every allegation of fact in the plaint, if not denied in the written statement shall be taken to be admitted by the defendant. What this rule says is, that any allegation of fact must either be denied specifically or by a necessary implication or there should be at least a statement that the fact is not admitted. If the plea is not taken in that manner, then the allegation shall be taken to be admitted." (Emphasis added) 52. It is important to be noted here that the Respondent has admitted that he increased the base price of the cinema tickets with 12% GST with no change in the cum selling price. In our view, it is clear admission on the part of the Respondent, even though, it is averred that the Respondent on the basis of....